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UNION HOMES REAL ESTATE INVESTMENT TRUST

REPORTS AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER, 2018

REPORTS AND FINANCIAL STATEMENTS


CONTENTS PAGE

Fund Manager, Professional Advisers etc 1

Statement of Fund Manager’s responsibilities 2

Statement of Trustees’ responsibilities 3

Report of Fund Manager 4

Report of the Trustee 10

Certification of the Accounts by Directors of the Fund Manager 13

Report of the Independent Auditor 14

Statement of Comprehensive Income 17

Statement of Financial Position 18

Statement of Changes in Equity 19

Portfolio Statement 20

Statement of Cashflows 21

Notes to the Financial Statements 22

Statement of value Added 45

Five-Year Financial Summary 46

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FUND MANAGER, PROFESSIONAL ADVISERS ETC

Directors of the Fund Manager: Dr Layi Fatona - (Chairman)

Mr. Patrick Ilodianya - (Managing Director/CEO)

Dr. Yemi Kale - (Non-Executive Director)

Mr. Yemi Gbenro - (Non-Executive Director)

Mr. Dimeji Sonowo - (Executive Director)

Fund Manager: SFS Capital Nigeria Limited,

Plot 287, Ajose Adeogun,

Victoria Island,

Lagos.

Trustee to the Fund: United Capital Trustees Limited,

UBA House, (12th Floor),

57 Marina, Lagos.

Custodian: UBA Global Investor Services,

UBA House (11th Floor),

57, Marina, Lagos.

Registrar: GTL Registrars Limited,

274, Murtala Muhammed Way,

Alogomeji, Yaba,

Lagos.

Auditors: Bakertilly,

(Chartered Accountants),

Kresta Laurel Complex (4th Floor),

376, Ikorodu Road,

Maryland,

Lagos.

Bankers: United Bank for Africa Plc

Polaris Bank Nigeria Limited

Sterling Bank

Coronation Bank

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REPORT OF FUND MANAGER


ECONOMIC REVIEW The Nigerian economy’s growth trajectory remained positive throughout 2018, with seven consecutive quarters of growth from Q2 2017.

In the first half of 2018, there was slow momentum within the Nigerian economy, with Q1

growth at 1.95% and Q2 growth slowing to 1.50%. Growth in the half of the year was driven by the Information and Communications Technology (ICT) and Construction sectors growing 11.81% and 7.9% respectively.

Q3 and Q4 2018 Gross Domestic Product (GDP) grew by 1.81% and 2.38% respectively, driven largely by the non-oil sector.

QUARTERLY GDP GROWTH (Q4 2016 – Q4 2018)

ANNUAL GDP GROWTH (2011 – 2018)

-1.73% -0.91%0.72%

1.17%

2.11%1.95%

1.50% 1.81%2.38%

Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18

5.31%4.21%

5.49% 6.22%

2.79%

-1.58%0.82%

1.93%

2011 2012 2013 2014 2015 2016 2017 2018

Source: National Bureau of Statistics (NBS), SFS Capital

Research


Research

8.60%

91.40%

Oil Sector Non-Oil Sector

26.14%

20.24%

53.62%

Agriculture Industries Services

CONTRIBUTION TO REAL GDP

Q4 2018

CONTRIBUTION OF OIL AND NON-OIL

SECTORS

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NON-OIL SECTOR

The Non-Oil sector’s contribution to GDP in 2018 was 91.40% in contrast to 91.33% in 2017. There were developments across all the sub-sectors, with Services and Agriculture spearheading the growth. Services sector output advanced by 3.8% year-on-year(“yoy”), derived from

advances of 13.2% in information and communications technology as well as gains from undertakings in the transport sector, growing 9.5% yoy. Manufacturing sector also experienced advances of 2.4% yoy as a result of growth in food production, oil refining and textile production

during the year. An improved exchange rate liquidity and higher fiscal spending were responsible for the growth as well as recovering crop production boosting the agricultural sector. OIL SECTOR

The oil sector contributed to 8.67% of annual GDP in 2018. Growth in the sector for the year

was 1.14% in contrast to 4.69% recorded in 2017. The sector accounted for 7.06% of GDP in Q4 2018. Oil production experienced a drop from an average of 1.95 millions of barrels per day

(“mbpd”) in Q3 2018 to 1.91 mbpd in Q4 2018. Growth in the sector contracted by 1.6% yoy from Q4 2017 to Q4 2018.

INFLATION RATE % (DECEMBER 2017 – DECEMBER 2018)

Inflation rate declined significantly in response to monetary tightening and exchange rate stability. The headline inflation continued to fall from 2017. Between January and December, headline inflation reduced from 15.1% to 11.4%. The year started with headline inflation

dropping to 15.13% yoy in January 2018 from a high of 18.72%. This slow-down occurred until July due to the base effect of Q3 2018 which was widely caused by the moderate month-on-month rise in headline inflation in Q3 2018 contrary to Q3 2017.

I&E FX WINDOW

The Investor and Exporters’ (I&E) FX window introduced in April 2017, has attracted nearly USD$60 billion as at December 2018 into the economy and is one of the strategic instruments

projected to support and stabilise the Naira against other currencies. On the back of stronger

FX reserves, together with the success of the I&E window, the average exchange rate of Naira to US dollar in 2018 was N362. The Naira came under pressure in the second half of the year, due to Foreign Portfolio Investor

(“FPI”) outflows from the system. Naira gradually fell from N360/USD to N364/USD in the H2 2018, representing a depreciation of circa 1.1%. The CBN remains the main supplier of liquidity at the window, therefore its long-term

sustainability has been called into question.

15.3715.13

14.33

13.34

12.48

11.6111.23 11.14 11.23 11.28 11.26 11.28 11.44

Dec/1

7

Mar/

18

Jun/1

8

Sep/1

8

Dec/1

8


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I&E FX WINDOW RATES (USD/NGN)

NIGERIA CRUDE OIL PRODUCTION, BRENT PRICE & NIGERIA’S FX RESERVES (2017 –

2018)

The price of Brent Crude Oil traded at an average of US$71.69 per barrel in 2018, rising 28% from an average of US$54.68 per barrel in 2017. Prices dropped to a low of US$50.47 per

barrel in December 2018 after reaching an annual high of US$86.29 in September 2018. Following the production cap of 1.65mbpd placed on Nigeria by the OPEC, and the relatively lower oil prices, Nigeria’s foreign currency earnings will come under pressure. This has further implications for the country, as a drop in foreign currency earnings could hamper the CBN’s

ability to defend the Naira.

FIXED INCOME MARKET REVIEW

In 2018, debt was mostly raised via Commercial Papers (“CP”) than any other instrument - even bonds. In 2018, four issuers raised circa N197 billion through CP issuances. The growth in CPs

is buoyed by higher risk aversion by banks as well as high lending rates. Also, the relatively lower rates on money market instruments in 2018, made for bolder fund raising outings by issuers.

There were 6 bond issuances in the year, raising a total of N65 billion. Flour Mills of Nigeria was the most active issuing CPs worth N8 billion as well as Bonds of N20 billion. There were no State Bond issuances in 2018 due to poor IGR making it difficult for them to access the bond market.

On the innovation front, the Federal Government of Nigeria issued the first ever Green bond in Africa, raising a total of N10.69 billion.

$361

$364.35

358

360

362

364

366

Jan/18 Mar/18 May/18 Jul/18 Sep/18 Nov/18

1,000

1,200

1,400

1,600

1,800

2,000

2,200

30

40

50

60

70

80

90


Oil Production FX Reserves Oil Price

Source: Bloomberg, Central Bank of Nigeria, OPEC, SFS Capital Research

Oil Production – in thousands of barrels per day

FX Reserves – US$ Billion (bn)

Oil Price – Brent Crude US$ per barrel

$43.12 bn

$53.8

$68.61

Source: Bloomberg, SFS Capital

Research

P a g e | 7

NIGERIAN FEDERAL GOVERNMENT (FGN) BOND YIELDS

NIGERIA TREASURY BILL YIELDS

Open Market Operations (“OMO”) have been rising in significance overtime. OMO has become the CBN’s monetary policy tool of choice. This is evident in the fact that the Monetary Policy

Rate (“MPR”) has remained at 14% for over 15 months, even in the face of high inflation. The year 2018, was a record year for OMO sales, as the CBN moped-up over N17 trillion in circa

172 transactions. OMO activities began to ramp up in Q4 of the year. OMO yields across all tenors increased from an average of 11.77% in Q2 and Q3 to an average of 13.26% in Q4 2018. The increased OMO activity by the CBN was done to wrangle the heightened liquidity pressure in the system. The pressure from higher rates in the US and offshore investor outflows, which

in turn put a strain on the external reserves drove the CBN to intervene significantly. This intervention led to relatively higher yields on the short-end of the yield curve.

12

12.5

13

13.5

14

14.5

15

15.5

16

16.5


3 Year 5 Year 10 Year 20 Year

6

8

10

12

14

16

18

20


30 Days 90 Days 180 Days 270 Days 365 Days

-

5,000

10,000

15,000

20,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Value of OMO Auctions (N'billions)

Source: Bloomberg, FMDQ, SFS Capital

Research

Source: Bloomberg, FMDQ, SFS Capital

Research

P a g e | 8

As the end of 2018, rates on 30-Day, 90-Day, 180-Day and 270-Day and 365-Day T-Bills were

at 12.25%, 12.81%, 13.53%, 14.33% and 14.66% respectively.

FGN bond yields began to rise in Q2 2018 due to foreign investors’ withdrawing from Nigeria’s fixed income market. At the end of the year, average yields on 3-Year, 5-Year, 10-Year and 20-Year FGN Bonds were 13.95%, 14.13%, 14.46% and 14.20% respectively. In Q1 2018,

refinancing by the government supported decline in yields through to Q2 2018, with average yields on 5 year and 10 year bonds falling to 13.43% and 13.53% as at Q2 18 from 14.03% and 14.12% respectively in Q4 18.

The CBN will need to continue its current intervention in the market due to depreciation pressure on the Naira. Although the 2019 budget is lower than 2018, the revenue prospects of the nation (taking account of the productions cap and lower oil prices) will most likely lead to increased

borrowing. Further argument for rates to remain elevated is informed by the nation’s debt maturities. The maturity profile for 2019 stands at over N14 trillion, which includes Treasury

Bills, OMO and Bonds. Therefore, we expect the CBN to maintain its tight liquidity stance in 2019.

REAL ESTATE MARKET REVIEW

Savills put the 2017 value for global real estate at $280.6Trn with the residential component accounting for a significant portion valued at $220.6Trn. Sub Sharan Africa’s residential real

estate market is estimated at $6.6Trn, unevenly distributed across its 1.12Bn inhabitants. With Nigeria’s housing deficit expected to reach 20M by 2025, the World Bank approved a $300M, 40-year loan for the financing of Nigeria’s housing sector. Taking a closer look at the Nigeria

real estate market, indications are that the residential market slowed. Few tenants changed their residences, renewing at current or slightly reduced rates. Studio apartments, 1 Bed and 2 Bed flats near the city centre continued to enjoy demand and

there’s also a shift by some developers in favour of the category. The office market continued to struggle as high vacancy rates and flexible lease terms remained paramount in many lease negotiations. Still, there were new leases signed and pipeline developments made steady

progress. Retail trends continue to support the growth of mid-sized shopping centres although vacancies in Grade A Malls have reduced on average with landlords demonstrating an understanding of the economy in their dealings with tenants.

High land costs, weak infrastructure and the absence of modern facilities continue to hamper the growth of Nigeria’s industrial sector. These justify the current rentals, which range between $3 - $4 psm/month with an average yield of 7.5%. On the office markets front, there has been an increase in supply with developments predominantly owner-occupied. Nigeria became the

fastest growing market in Africa for Airbnb in 2018. The platform allows property owners earn income on their residential assets, growing by over 200% in the last five years. Visitors and holiday makers can still get a good bargain from hotels as the worst days for the hospitality

sector seem to be over. The sector grew by 8% YoY. International investors have taken positions, some of which include Hilton’s Legend Hotel and Marriot’s ongoing development (both in Ikeja) Lagos, and Hawthorne suites in Abuja.

One in two Nigerians have limited or no access to the electricity grid, the majority of which are in rural communities. This has put the government under more pressure to deliver power projects and opportunities for startups to capture Nigeria’s $2Bn solar home system market.

On the regulatory dashboard, the most noteworthy was the change in the Lagos State Land Use Charge 2011. There were changes in the tax base, as properties would now be taxed based on market values as opposed to fair values in the past. The non-compliance penalty increased from

$278 to $694 or alternatively, 3 months’ imprisonment. Also the new IFRS 15 standards mandate that real estate companies may now recognize revenue over time as they satisfy performance obligations during the construction period of the development project as opposed

P a g e | 9

to the current recognition of revenue upon the transfer of risks and rewards to customers –

which is practically upon completion of the project development and handover of real estate

units to customers. FUND PERFORMANCE

Union Homes Real Estate Investment Trust (“UH REIT” or “the Fund”) recorded gross income of N561 million, a 5.81% increase from the year before. This increase was largely driven by the significant increase in rental income which came in at N263 million for 2018, representing a rise of 29.18%

recorded in 2017. The Fund’s costs also dropped by 13.70% to N177 million in 2018. This was as a result of lower management fees.

For the year ended December 2017, the Fund paid out dividend for the first since 2014. The sum of N187 million (N0.75 per share) was distributed to Fund holders. The Fund is proposing a dividend of N1.75 per share for the year ended December 2018.

12.04 12.41 12.72

9.78

2015 2016 2017 2018

Fund NAV (in N billions)

REPORT OF THE TRUSTEE


The Trustee hereby present their Report on the affairs of the Union Homes Real Estate Investment Trust

(The Fund) together with the Auditors’ Report and Financial Statements for the year ended 31st

December, 2018.

Principal Activities & Business Review:

The Fund opened for subscription on 19th August, 2008 and commenced investment activities on 3rd

February, 2009. Registered as a Close-ended Investment Scheme and Real Estate Investment Trust

(REIT) in Nigeria by the Securities and Exchange Commission under the Investment and Securities Act

2007, the Fund is governed by a Trust Deed with United Capital Trustees Limited. The Fund is

established to provide Investors with long term capital appreciation and to optimize investors’ returns

by investing in a strategic mix of Real Estate properties and money market instruments as specified in

Clause 3.1 of the Trust Deed and as spelt out in the Prospectus. The Fund is listed on the Floor of the

Nigerian Stock Exchange and in line with international best practice, its assets are totally segregated

from the assets of the Manager.

Performance of the Union Homes Real Estate Investment Trust:

The performance of the Fund as a function of its Net Asset Value is as follows:

2018 2017

N’000 N’000 Net Asset Value - 9,789,579 12,708,080

The Net Asset Value decreased from N12,708,080 as at 31 December, 2017 to N9,789,579 as at 31

December 2018 due to the SWAP of the properties during the year.

Operating Results:

2018 2017

N’000 N’000 Net loss/income (After Tax) 363,650 294,706

ADMINISTRATION OF THE SCHEME:

Income Generation

During the period under review, Net Income generated by the Fund increased from N294,706.00 in

2017 to N363,650.00 in year 2018 thus increasing value for the Unit-holders.

- Page 10

-

UNION HOMES REAL ESTATES INVESTMENT TRUST (REIT)


Properties Under Management

During the review period, two (2) key properties were vacant due to major repairs on them which

decreased the REIT’s income significantly as they were not occupied for two (2) years. The properties

are currently under repair and it is expected that once the repairs are completed, they will generate

additional income for the REIT. It is worthy of note that there were properties Swapped with the former

Fund Manager (Union Homes Savings and Loans) in exchange for reduction of their unit holdings in

the Fund during the period.

Rating and Valuation:

The Fund Manager is required to carry valuation of the REIT’s properties every (2) two years and this

was done as required. The Fund Manager has sought the consent of the Regulator for postponement of

the Rating of the REIT to March 2020 and this is based on the Fund Manager’s analysis of the Fund’s

position and the strategic three (3) years consecutive distribution of the Fund’s profit to Unitholders. As

Trustees to the Fund, we believe this will further restore confidence of Unitholders in the Fund as well

as enhance the investment grade Rating for the Fund in due course.

Compliance:

Asset Allocation Requirement

Compliance with the Asset Allocation requirement of the Fund (90% in Real Estate related investment

and 10% in Liquid Asset investments) as at 31st December, 2018 was 85.9% in Real Estate Investments

and 4.7% in Real Estate related, while 9.41% was invested in the Liquid Asset. The REIT improved in

the portfolio mix for the year 2018.

However, the Fund Manager was in violation of SEC Rule 450 (2) relating to ownership of a minimum

of 5% of units of the Fund by its promoters. This was however earlier communicated to the Fund

Manager with a copy to the Commission, following which the Fund Manager started procuring the

necessary units in the Fund. We believe that before the end of second quarter of 2019, the Fund Manager

would have complied fully with the provisions of SEC Rule 450 (2).

The Trustees believe the Management of the Fund has not been in full compliance with the

provisions of the Trust Deed and Investment and Securities Act (2007) due to the violation of SEC

Rule 450 (2).

- Page 11 -


REPORT OF THE INDEPENDENT AUDITOR

TO THE MEMBERS OF


Report on the Audit of the Financial Statements

We have audited the financial statements of the Fund which comprise the statement of financial position

as at 31 December 2018, the statement of comprehensive income, statement of changes in equity,

statement of cash flows for the year then ended and notes to the financial statements including a

summary of significant accounting policies.

Opinion

In our opinion, the accompanying financial statements give a true and fair view of the financial position

of Union Homes Real Estates Investment Trust (REIT) as at 31 December 2018, its financial

performance and its cash flows for the year then ended in accordance with the provisions of both the

Companies and Allied Matters Act CAP C20 2004 and the Financial Reporting Council of Nigeria

(FRCN) Act No.6 of 2011.

Basis of Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our

responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit

of the Financial Statements section of our report. We are independent of the Company within the

meaning of Nigerian Standards on Auditing (NSAs) issued by the Institute of Chartered Accountants of

Nigeria and have fulfilled our other responsibilities under those ethical requirements. We believe that

the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

- Page 14 -


Going Concern

The Fund’s financial statements have been prepared using the going concern basis of accounting. The

use of this basis of accounting is appropriate unless management either intends to liquidate the Company

or to cease operations, or has no realistic alternative but to do so.

Management has not identified a material uncertainty that may cast significant doubt on the entity’s

ability to continue as a going concern, and accordingly none is disclosed in the financial statements.

Based on our audit of the financial statements, we also have not identified such a material uncertainty.

Responsibilities of the Fund Manager’s for the Financial Statements

The Fund Manager is responsible for the preparation and fair presentation of these financial statements

which are in compliance with the requirements of both the Financial Reporting Council of Nigeria Act,

No. 6 of 2011 and the Companies and Allied Matters Act, Cap C20 LFN, 2004. This responsibility

includes: designing, implementing and maintaining internal control relevant to the preparation and fair

presentation of the financial statements that are free from material misstatements, selecting and applying

appropriate accounting policies, and making accounting estimates that are reasonable in the

circumstances.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our responsibility is to express an independent opinion on these financial statements based on our audit.

We conducted our audit in accordance with Nigerian Standards on Auditing (NSAs) issued by the

Institute of Chartered Accountants of Nigeria.

Those standards require that we comply with ethical requirements and plan and perform the audit to

obtain reasonable assurance that the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in

the financial statements. The procedures selected depend on the auditors’ judgment, including the

assessment of the risks of material misstatement of the financial statements. In making those risk

assessments, the auditor considers internal control relevant to the entity’s preparation and fair

presentation of the financial statements in order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s

internal control. An audit also includes evaluating the appropriateness of accounting policies used and

the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall

presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for

our opinion.

- Page 15 -


STATEMENT OF COMPREHENSIVE INCOME (TOTAL RETURN)


Note 2018 2017

N’000 N‘000

Investment income 3 561,606 530,622

Deduct:

Operating expenses 4 (177,446) (205,624)

Net income before taxation 384,160 324,998

Taxation 5 (20,510) (30,292)

Net income after taxation 16 363,650 294,706

======= =========

Net increase in unit holder’s fund from

investment activities 363,650 294,706

======= =========

Earnings per share basic(N) 1.93 1.18

======== ========

The notes on pages 22 to 44 form an integral part of these financial statements.

- Page 17 -


STATEMENT OF CHANGES IN EQUITY

(MOVEMENTS IN UNIT HOLDERS’ FUND)


Unit General Total

Equity reserve

N’000 N’000 N’000

1 January, 2018 12,500,989 207,091 12,708,080

Units disposed off during the year (3,094,636) - (3,094,636)

Dividend - (187,515) (187,515)

Transfer from income statement - 363,650 363,650

31 December, 2018 9,406,353 383,226 9,789,579

======== ======== =========

1 January, 2017 12,500,989 (87,615) 12,413,374

Transfer from

income statement - 294,706 294,706

---------------- --------------- ---------------

31 December, 2017 12,500,989 207,091 12,708,080

========== ======== =========

The notes on pages 22 to 44 form an integral part of these financial statements

- Page 19


PORTFOLIO STATEMENT


2018 2017

Market Percentage Market Percentage of

value of net assets

portfolio

N’000 % N’000 %

Real estate 9,137,916 85.89 11,308,813 87.55

Real estate related 500,000 4.70 300,000 2.32

9,637,916 90.59 11,608,813 89.87

------------- -------- -------------- ----------

Money market investments

Cash and cash equivalent 80,446 417,392

Financial assets held to maturity 970,934 914,676

1,051,380 1,332,068

Unclaimed dividend (50,584) (23,970)

------------ ------------

1,000,796 9.41 1,308,098 10.13

-------------- -------- ------------- ----------

Total value of portfolio 10,638,712 100 12,916,911 100

======== ==== ======== ======

The Fund is expected to invest 90% of the Fund’s total assets in Real Estates and Real Estates related

assets, while the remaining 10% should be invested in money market.

As at 31 December, 2018, the Fund’s investment in Real Estates was slightly above 90% of the Fund’s

total assets.

- Page 20 -


STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2018

2018 2017

Note N’000 N’000

Operating profit before working capital changes 17.1 398,700 339,234

Working capital changes 17.ii 658,875 50,998

Income tax paid (20,510) (30,292)

Net cash flow from operating activities 1,037,066 359,940

--------------- -------------

Cash flow from investing activities:

Development of investment in properties (498,103) (454,077)

Disposal of investment properties 2,469,000 -

Purchases of PPE (6,480) (2,624)

Investment in Treasury bills (56,278) 244,344

Net cash flow from investing activities 1,908,139 (212,357)

--------------- ---------------

Financing activities

Disposal of shares (3,094,636) -

Dividend paid (187,515) -

(3,282,151 -

--------------- -------------

Net increase in cash and cash equivalent (336,946) 147,583

Cash and equivalents brought forward 417,392 269,809

---------------- ----------------

Cash and cash equivalent at the end of the year 6 80,446 417,392

========= =========

The notes on pages 22 to 44 form an integral part of these financial statements

- Page 21 -


NOTES TO THE FINANCIAL STATEMENTS


1.0 General information

Reporting entity

Union Homes Real Estate Investment Trust (REIT) was established on August 19, 2008 as a Unit

Trust Scheme, registered and listed on the floor of the Nigerian Stock Exchange on 2 July, 2010.

The Fund is managed by SFS Capital Nigeria Limited which is located at Plot 287, Ajose Adeogun

Street, Victoria Island, Lagos.

The Union Homes REIT is an actively managed, close ended unit Trust scheme whose primary

objective is to achieve long term capital appreciation of its assets by investing a maximum of 90%

of the assets in Real Estate and Real Estate related investments. The Trust Deed provides for a

maximum of 10% of the Fund’s total assets to be invested in quality money market instruments to

ensure liquidity.

The Fund is established to provide an opportunity for a large number of investors to share the

ownership of a group of real estate assets through the medium of a Fund that buys, develops,

manages and sells real estate assets.

2.0 Accounting policies

The principal accounting policies adopted in the preparation of these financial statements are set

out below. These policies have been consistently applied to all the years presented, unless

otherwise stated.

2.1 Basis of preparation

Statement of compliance

The financial statements have been prepared in compliance with International Financial Reporting

Standards (IFRSs) as issued by the International Accounting Standards Board (IASB) and with

the interpretations issued by the International Financial Reporting Interpretation Committee

(IFRIC) as adopted by the Federal Republic of Nigeria.

Functional and presentation currency

The financial statements are presented in Nigeria Naira (N) which is the Fund’s functional and

presentation currency.

- Page 22 -


Use of estimates and judgments

The preparation of financial statements in conformity with IFRS requires management to make

judgments, estimates and assumptions that affect the application of accounting policies and the

reported amounts of assets, liabilities, income and expenses. Actual results may differ from these

estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to

accounting estimates are recognised in the period in which the estimate is revised if the revision

affects only that period or in the period of the revision and the future periods if the revision affects

both current and future periods.

Basis of measurement

The financial statements have been prepared on the historical cost basis except for certain financial

instruments measured at fair value through profit or loss.

2.2 Standards issued but not yet effective

The standards listed below have been issued but not yet effective up to the Fund’s financial year

ended 31 December, 2018. The Fund intends to adopt these standards when they become

effective. Management expects the adoption of these standards and amendments, in most cases,

not to have any significant impact on the Fund’s financial position or performance in the period

of initial application but additional disclosures may be required. In cases where it will have an

impact, management shall assess the possible impact.

New or Revised

Standards/Pronouncements Effective date Issues addressed

Amendments to IFRS 9

(prepayment features)

On or after 01

January, 2019

The IASB published 'Prepayment Features with Negative

Compensation (Amendments to IFRS 9)' to address the

concerns about how IFRS 9 'Financial Instruments'

classifies particular prepayable financial assets. In addition,

the IASB clarified an aspect of the accounting for financial

liabilities following a modification.

Amendments to IAS 28

(long-term interests)

On or after 01

January, 2019

The IASB published 'Long-term Interests in Associates and

Joint Ventures (Amendments to IAS 28)' to clarify that an

entity applies IFRS 9 'Financial Instruments' to long-term

interests in an associate or joint venture that form part of the net inve

method is not applied.

- Page 23 -


Amendments to IAS 19 (plan

amendments)

On or after 01

January, 2019

The IASB published 'Plan Amendment, Curtailment or

Settlement (Amendments to IAS 19)' to harmonise

accounting practices and to provide more relevant

information for decision-making. An entity applies the

amendments to plan amendments, curtailments or

settlements occurring on or after the beginning of the

first annual reporting period that begins on or after

1 January 2019.

IFRIC 23- Uncertainty over

Income Tax Treatments

On or after 01

January, 2019

IFRIC 23 'Uncertainty over Income Tax Treatments' was

issued by the IASB on 7 June 2017 and is effective for

periods beginning on or after 1 January 2019, with earlier

adoption permitted. The Interpretation specifically addresses

whether an entity considers uncertain tax treatments separately or toge

tax treatments by tax authorities, how an entity determines

taxable profit (tax loss), tax bases, unused tax losses,

unused tax credits and tax rates as well as how an entity

considers changes in facts and circumstances.

IFRS 16- Leases

On or after 01

January, 2019

IFRS 16 'Leases' was issued by the IASB on 13 January 2016

and is effective for periods beginning on or after

1 January 2019, with earlier adoption permitted if IFRS 15

'Revenue from

Contracts with Customers' has also been applied.

The standard requires lessees to recognise nearly all leases

on the balance sheet which will reflect their right to use

an assets for a period of time and the associated liability

for payments whil the lessor's accounting largely remains

unchanged.

- Page 24 -


Annual Improvements to

IFRS Standards 2015–2017

Cycle

On or after 01

January, 2019

The IASB issued 'Annual Improvements to IFRS Standards

2015–2017 Cycle,' which contains amendments to four

International Financial Reporting Standards (IFRSs) as

result of the IASB's annual improvements project.

The IASB makes amendments to the following standards:

IFRS 3 and IFRS 11 - The amendments to IFRS 3 clarify

that when an entity obtains control of a business that is a

joint operation, it remeasures previously held interests in

that business. The amendments to IFRS 11 clarify that

when an entity obtains joint control of a business that is

a joint operation, the entity does not remeasure previously

held interests in that business. IAS 12 - The amendments

clarify that the requirements in the former paragraph 52B

(to recognise the income tax consequences of dividends

where the transactions or events that generated distributable

profits are recognised) apply to all income tax consequences

of dividends by moving the paragraph away from

paragraph 52A that only deals with situations where

there are different tax rates for distributed and undistributed

profits. IAS 23 - The amendments clarify that if any

specific borrowing remains outstanding after the related

asset is ready for its intended use or sale, that borrowing

becomes part of the funds that an entity borrows generally

when calculating the capitalisation rate on general

borrowings.

2.3 Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are as

set out below. These policies have been applied consistently to all years presented, unless

otherwise stated.

i. Cash and cash equivalents

Cash and cash equivalents include cash in hand and at bank, call deposits and short term highly

liquid financial assets (including money market funds) with original maturities of less than or of

three months, which are subject to insignificant risk of changes in their fair value, and are used by

the Fund in the management of its short-term commitments.

ii. Investment properties

Investment properties comprise of completed property and property under construction or re-

development held to earn rental income or for capital appreciation or both.

Investment property is measured initially at cost including transaction costs. Transaction costs

include professional fees for legal services and other commissions to bring the property to the

condition necessary for it to be capable of operating. The carrying amount also includes the cost

of replacing part of an existing investment property at the time that cost is incurred if the

recognition criteria are met.

- Page 25 -


Subsequent to initial recognition, investment properties are stated at fair value. Gains or losses

arising from changes in the fair values are included in the income statement in the year in which

they arise.

Fair values are determined individually, on a basis appropriate to the purpose for which the

property is intended and with regard to recent market transactions for similar properties in the

same location. In an active market, an independent valuer, holding a recognized and relevant

professional qualification and with recent experience in the location and category of investment

properties being valued, values the portfolio periodically in line with the Trust Deed.

The valuer, in addition to the qualifications above, should hold Financial Reporting Council (FRC)

of Nigeria registration certificate in accordance with section 41 of the Financial Reporting Council

of Nigeria Act, No.6 of 2011.

Investment property is derecognised when it has been disposed of or permanently withdrawn from

use and no future economic benefit is expected from its disposal. Any gains or losses on the

retirement or disposal of investment property is recognised in the income statement in the year of

retirement or disposal.

Gains or losses on the disposal of investment property is determined as the difference between net

disposal proceeds and the carrying value of the asset in the previous full period financial

statements.

iii. Property, Plant and Equipment

The Fund does not hold any property, plant and equipment at present as it is against the position

of the Securities and Exchange Commission (SEC). All properties, plant and equipment used for

managing the Fund are owned by the Fund manager who is paid management fees. However,

items of plant and machinery relating to investment property are accounted for separately and

depreciated over its useful life span.

iv) Financial instruments

(a) Recognition and measurement

Financial assets and financial liabilities are recognised in the statement of financial position when

the company becomes a party to the contractual provisions of the instrument. Financial assets and

financial liabilities are initially recognised at their fair value plus, in the case of all financial assets

not carried at fair value through profit or loss, transaction costs that are directly attributable to

their acquisition. Purchases and sales of financial instruments are measured on a trade-date basis.

Financial liabilities and equity instruments, issued by the company, are classified according to the

substance of the contractual arrangements entered into and the definition of a financial liability

and an equity instrument. An equity instrument is any contract that evidences a residual interest

in the assets of the company after deducting all of its liabilities.

Financial assets are derecognised when and only when:

n The contractual rights to the cash flows from the financial assets expire; or

n The company transfers the financial asset, including substantially all the risks and

rewards of ownership of the asset.

- Page 26 -


A financial liability is derecognised when and only when the liability is extinguished, that is, when

the obligation specified in the contract is discharged, cancelled or has expired. The difference

between the carrying amount of a financial liability (or part thereof) extinguished or transferred to

another party and consideration paid, including any non-cash assets transferred or liabilities

assumed, is recognised in profit or loss.

Investments made by the company which are classified as either held at fair value through profit

or loss or available-for-sale, are measured at subsequent reporting dates at fair value.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an

orderly transaction between market participants at the measurement date. The fair values of

quoted investments and unit trusts in active markets are based on current market prices. Since

actual market prices are available in determining fair values, no significant estimates or valuation

models are applied in determining the fair value of quoted financial instruments.

(b) Fair value hierarchy

Fair values are determined according to the following hierarchy based on the requirements in IFRS

7 ‘Financial Instruments: Disclosures’:

– Level 1: quoted market prices: financial assets and liabilities with quoted prices for identical

instruments in active markets.

– Level 2: valuation techniques using observable inputs: quoted prices for similar instruments in

active markets or quoted prices for identical or similar instruments in inactive markets and

financial assets and liabilities valued using models where all significant inputs are observable.

– Level 3: valuation techniques using significant unobservable inputs: financial assets and

liabilities valued using valuation techniques where one or more significant inputs are

unobservable.

The best evidence of fair value is a quoted price in an active market. In the event that the market

for a financial asset or liability is not active, a valuation technique is used.

(c) De-recognition of financial instruments

Financial assets are derecognised when the contractual right to receive cash flows from the

investments have expired or on trade date when they have been transferred and the Company has

also transferred substantially all risks and rewards of ownership. Non-cash financial assets

pledged, where the counterparty has the right to sell or re-pledge the assets to a third party, are

classified as pledged assets.

Financial liabilities are derecognised when they are extinguished, that is when the obligation is

discharged, cancelled or expires.

- Page 27 -


(d) Financial assets

Financial assets are classified into the following categories: financial assets at fair value through

profit or loss; loans and receivables, held-to-maturity and available-for-sale financial assets.

Management determines the classification of financial assets at initial recognition. This

classification depends on the nature and purpose of the financial asset.

(i) Financial assets at fair value through profit or loss

This category has two components: those held for trading, and those designated at fair value

through profit or loss at inception. A financial asset is classified in this category if acquired

principally for the purpose of generating a profit from short-term fluctuations in price or dealer’s

margin, or a security is included in a portfolio in which a pattern of short-term profit taking exists

or if so designated by management at inception as held at fair value through profit or loss.

Financial assets designated at fair value through profit or loss at inception are those that are:

· Held to match liabilities that are linked to changes in fair value of these assets. The

designation of these assets at fair value through profit or loss eliminates or significantly

reduces a measurement or recognition inconsistency (sometimes referred to as ‘an

accounting mismatch’) that would otherwise arise from measuring assets or liabilities or

recognising gains and losses on them on different bases; or

· Managed and whose performance is evaluated on a fair value basis. Information about

these financial assets is provided internally on a fair value basis to the company’s key

management personnel.

The company’s investment strategy is to invest in equity and debt securities, and to evaluate

them with reference to their fair values. Assets that are part of these portfolios are designated

upon initial recognition at fair value through profit or loss.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments

that are not quoted in an active market. These arise when the company provides money, goods

or services directly to a debtor with no intention of trading the receivable. Subsequent to initial

recognition, loans and receivables are measured at amortised cost using the effective interest

method, less impairment losses. The amortised cost of a financial asset or liability is the amount

at which the financial asset or liability is measured on initial recognition, minus principal

repayments, plus or minus the cumulative amortisation using the effective interest method of any

difference between the initial amount recognised and the maturity amount, minus any reductions

for impairment of financial assets. The carrying amount represents its fair value.

- Page 28 -


(iii) Available-for-sale

Available-for-sale instruments are those intended to be held for an indefinite period of time,

which may be sold in response to needs for liquidity or changes in interest rates, exchange rates

or equity prices. Subsequent to initial recognition, financial assets classified as available-for-sale

are measured at fair value on the statement of financial position.

(iv) Held-to-maturity

Held-to-maturity investments are non-derivative financial assets with fixed or determinable

payments and fixed maturities that management has both the positive intent and ability to hold

to maturity. Were the company to sell more than an insignificant amount of held-to-maturity

investments, the entire category would be tainted and reclassified as available-for-sale assets

with the difference between amortised cost and fair value being accounted for in other

comprehensive income (OCI). Held-to-maturity investments are carried at amortised cost, using

the effective interest method, less any impairment losses.

(e) Financial liabilities

Financial liabilities are recognised initially at fair value, generally being their issue proceeds net

of transaction costs incurred. Financial liabilities are subsequently stated at amortised cost and

interest is recognised over the period of the borrowing using the effective interest method.

The company classifies certain liabilities at fair value through profit or loss, mainly to match the

accounting classification of assets with similar risks. Such liabilities are accounted for at fair

value with changes in fair value recognised in profit or loss.

(f) Gains and losses

Gains and losses arising from changes in the fair value of the ‘financial assets at fair value

through profit or loss’ category are included in profit or loss in the period in which they arise.

Gains and losses arising from changes in the fair value of available-for-sale financial assets are

recognised in other comprehensive income, until the financial asset is derecognised or impaired

at which time the cumulative gain or loss previously recognised in other comprehensive income

is recognised in profit or loss. Interest income, calculated using the effective interest method, is

recognised in profit or loss except for short term receivables where the recognition of interest

would be immaterial. Dividends on available-for-sale equity instruments are recognised in the

profit or loss when the company’s right to receive payment is established.

(g) Effective interest method

The effective interest method is a method of calculating the amortised cost of a debt instrument

and of allocating interest income over the relevant period. The effective interest rate is the rate

- Page 29 -


that exactly discounts estimated future cash receipts (including all fees on points paid or received

that form an integral part of the effective interest rate, transaction costs and other

premiums or discounts) through the expected life of the debt instrument, or (where appropriate)

a shorter period, to the net carrying amount on initial recognition.

(h) Offsetting of financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement of financial

position when there is a legally enforceable right to offset the recognised amounts and there is

an intention to settle on a net basis or, realise the asset and settle the liability simultaneously.

Impairment of financial assets

· Assets carried at amortised cost

At each reporting date, the company assesses whether there is objective evidence that a financial

asset or group of financial assets is impaired. A financial asset or a group of financial assets is

impaired and impairment losses are recognised if, and only if, there is objective evidence of

impairment as a result of one or more events that occurred after the initial recognition of the

asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash

flows of the financial asset or group of financial assets that can be reliably estimated.

The company first assesses whether objective evidence of impairment exists individually for

financial assets that are individually significant, and individually or collectively for financial

assets that are not individually significant. If the company determines that no objective evidence

of impairment exists for an individually assessed financial asset, whether significant or not, it

then includes the asset in a group of financial assets with similar credit risk characteristics and

collectively assesses them for impairment.

Assets that are individually assessed for impairment and for which an impairment loss is or

continues to be recognised are not included in the collective assessment of impairment. If there

is objective evidence that an impairment loss on loans and receivables has been incurred, the

amount of the loss is measured as the difference between the assets’ carrying amount and the

present value of estimated future cash flows discounted at the financial asset’s original effective

interest rate.

The carrying amount of the asset is reduced through the use of an allowance account and the

amount of the loss is recognised in profit or loss. If a loan has a variable interest rate, the discount

rate for measuring any impairment loss is the current effective interest rate determined under the

contract.

- Page 30 -


When a loan is uncollectible, it is written off against the related provision for loan impairment.

Such loans are written off after all the necessary procedures have been completed and the

amount of the loss has been determined. Subsequent recoveries of amounts previously written

off decrease the amount of the provision for loan impairment in profit or loss.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be

related objectively to an event occurring after the impairment was recognised (such as an

improvement in the debtor’s credit rating), the previously recognised impairment loss is reversed

by adjusting the allowance account. The reversal shall not result in a carrying amount of the

financial asset that exceeds what the amortised cost would have been had the impairment not

been recognised at the date the impairment is reversed. The amount of the reversal is recognised

in profit or loss.

· Assets carried at fair value

At each reporting date, the company assesses whether there is objective evidence that a financial

asset or a group of financial assets is impaired. In the case of investments classified as available-

for-sale, a significant or prolonged decline in the fair value of the security below its cost is

considered in determining whether the assets are impaired. If any such evidence exists for

available-for-sale financial assets, the cumulative loss – measured as the difference between the

acquisition cost and the current fair value, less any impairment loss on that financial asset

previously recognised in profit or loss – is removed from comprehensive income and recognised

in profit or loss.

Impairment losses recognised in profit or loss on equity instruments classified as available-for-

sale are not subsequently reversed through profit or loss. Any increase in fair value subsequent

to an impairment loss is recognised in other comprehensive income. However, if in a subsequent

period the fair value of a debt instrument classified as available-for-sale increases and the

increase can be objectively related to an event occurring after the impairment loss was recognised

in profit or loss, the impairment loss is reversed through profit or loss.

v. Provisions

A provision is recognized only if, as a result of a past event, the Fund has a present legal or

constructive obligation that can be estimated reliably, and it is probable that an outflow of

economic benefits will be required to settle the obligation. The provision is measured at the best

estimate of the expenditure required to settle the obligation at the reporting date.

Provisions are not recognized for future operating losses. Where there are a number of similar

obligations, the likelihood that an outflow will be required in settlement is determined by

considering the class of obligations as a whole.

- Page 31 -


Provisions are measured at the present value of the expenditures expected to be required to settle

the obligation.

vi. Deferred income – rent received in advance

Deferred income represents income collected but not earned as at the company’s year end. This is

primarily composed of rent received in advance on leased properties. Deferred income is recorded

for all income related to the trade of the business in the next financial year.

vii. Borrowings – mortgage loan

Borrowings, inclusive of transaction costs, are recognised initially at fair value. Borrowings are

subsequently stated at amortised cost using the effective interest rate method; any difference

between proceeds and the redemption value is recognised in the statement of other comprehensive

income over the period of the borrowing using the effective interest rate method.

Borrowings are classified as current and non-current liabilities depending on the repayment period

of the borrowing.

viii. Related party transactions

Related party transactions are disclosed separately as to the type of relationship that exists and the

outstanding balances necessary to understand their effects on the financial position and the mode

of settlement.

ix Taxes

The Fund is not subjected to income and education taxes on its income by the concession given to

the Fund. This concession was given and approved by the Federal Ministry of Finance in

accordance with international best practice. This concession covers:

Ø Exemption from Companies Income Tax, although WHT will be imposed on dividend

distribution to investors; any distribution below the prescribed threshold (i.e. 90%) will

disqualify the REIT from tax exemption.

Ø Exemption from stamp duties to reduce transaction costs; and

Ø Exemption from Capital Gains Tax on the ground that income arising from sales or

disposal will be ploughed back for the purchase of additional properties or distributed as

dividend.

- Page 32 -


x. Unit holders equities and reserves

Unit issue costs

Incremental costs directly attributable to the issue of new units are shown in equity as a deduction.

Distributions

Distributions to the Fund’s unit holders are recognised in equity in the period in which they are

made or, if earlier, approved by the Fund’s unit holders. Distributions for the year that are declared

after the date of the statement of financial position are dealt with in the subsequent events note.

xi. Foreign currency translation

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates

prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the

settlement of such transactions and from the translation at year-end exchange rates of monetary

assets and liabilities denominated in foreign currencies are recognised in the income statement.

Translation differences on non-monetary items, such as equities held at fair value through profit

or loss, are reported as part of the fair value gain or loss. Translation differences on non-monetary

items, such as equities classified as available-for-sale financial assets, are included in the fair value

reserve in equity.

xii. Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefit will flow to the

Fund and the revenue can be reliably measured. Revenue of the Fund comprises of:

Rental income:

Rental income receivable from operating leases, less the Fund’s initial direct costs of entering into

the leases, is recognised on a straight-line basis over the term of the lease. Amounts received from

tenants to terminate leases or to compensate for dilapidations are recognised in the income

statement when they arise.

- Page 33 -


Services rendered/service charge and expenses recoverable from tenants:

Revenue associated with the rendering of services is recognised with reference to the stage of

completion of the transaction at the end of the accounting period. Income arising from expenses

recharged to tenants is recognised in the period in which the expense can be contractually

recovered.

Sale of completed property and Sale of property under development:

Income is recognised when the significant risks and returns have been transferred to the buyer,

which is normally on unconditional exchange of contracts. For conditional exchanges, sales will

be recognised only when all the significant conditions are satisfied.

xiii. Borrowing costs

Borrowing costs directly attributable to the acquisition or construction of an asset that necessarily

takes a substantial period of time to get ready for its intended use or sale are capitalised as part

of the cost of the respective assets. All other borrowing costs are expensed in the period in which

they occur. Borrowing costs consist of interest and other costs that the Fund incurs in connection

with the borrowing of funds.

xiv. Expenditure recognition

Expenditures are recognised as they accrue during the course of the year. Analysis of expenses

recognised in the income statement is presented as classification based on either their nature or

their function within the Fund whichever provides information that is reliable and more relevant.

- Page 34 -


2018 2017

N’000 N’000

3. Investment income

Rental income 263,367 203,883

Interest from deposits 225,606 302,919

Sundry income (note 3.1) 72,633 23,820

561,606 530,622

======= =======

3.1 Sundry income

Dividend income 46,420 -

Legal fee 2,150 4,378

Provision write back 20,013 19,442

Scrap sales 4,050 -

72,633 23,820

====== =======

4. Operating expenses

Management fee 98,787 129,380

Property maintenance expenses 25,582 2,231

Depreciation plant & machinery 14,540 11,945

Insurance fee 10,743 11,956

Custodian fees 9,878 12,938

Regulatory fee 3,260 3,260

Audit fee 3,000 3,000

Rating agency 2,500 -

Provision for AGM expenses 2,500 -

Trusteeship fee 2,500 2,500

Agency commission 1,145 -

Registrars fee 1,021 261

Legal charges 955 3,670

Independent Member sitting allowance 840 840

Advertisement and public relations 160 434

Bank charges 35 56

Provision for property maintenance - 20,013

Valuation fees - 2,980

Website expenses - 160

177,446 205,624

======= ========

- Page 35 -


2018 2017

5. Taxation N’000 N’000

Withholding tax paid 20,510 30,292

======= =======

This amount represents amount deducted from interest received from call deposits with banks which is

deemed to be the final tax paid by the Fund.

2018 2017

6. Cash and cash equivalents N’000 N’000

Cash in hand - -

Cash at bank 3,611 6,825

Short-term deposits 76,835 410,567

80,446 417,392

======= ========

The details of short term deposits are:

Principal Principal

Amount Amount

N’000 N’000

UBA Nominee 27,734 -

Polaris Bank Nigeria Limited 24,512 178,555

Sterling Bank Plc 24,589 232,012

76,835 410,567

======= =========

Cash at bank earns interest at floating rates based on daily bank deposit rate. The short term deposits are

made for varying periods of between one day and three months, depending on the immediate cash

requirements of the Fund, and earn interest at the respective short-term deposit rates.

7. Financial assets held to maturity Discounted Fair Value Tenor

Investment in treasury bills Value

2018

Polaris Bank Nigeria Limited 77,671 90,000 341days

Stanbic IBTC Bank 893,283 1,031,404 363days

970,954 1,121,404

======= ========

2017 N'000 N'000 Skye Bank 886,926 1,000,000 364 days

Coronation Merchant Bank 27,750 31,269 265 days

914,676 1,031,269

======== ========

2018 2017

8. Other assets – prepayments N’000 N’000

Insurance – fire and special peril policy 6,721 6,893

======= ========

Insurances prepaid and the respective amounts are on the following investment properties.

- Page 36 -


2018 2017

N’000 N’000

Savannah apartments, locke apartments

Macdonald and Victoria Court 4,354 4,375

9, Mike Akhigbe Way, Abuja 267 267

Plot 3, Block A4, Olusegun Aina Street, Ikoyi 490 491

28A, Rumens Street, Ikoyi 1,280 1,429

Victors Court 2, Palace Road, Parkview, Ikoyi -

Continental Court, Sinari Daranijo Street, Victoria Island -

Amina Court, Abuja 330 331

6,721 6,893

====== ======

9. Trade and other receivables

Rent receivable (note 9.1) 58,152 159,049

Other receivables:

Interest receivable (note 9.2) 181,342 158,994

Union Homes Suspense Account (note 9.3) - 243

239,494 318,286

======= ========

9.1 Rent receivable

Rent receivable on properties as at 31 December, 2018 comprises of rent due on the following properties:

2018 2017

McDonald Court, Block 4-6 McDonald N’000 N’000

Road Ikoyi, Lagos 28,125 28,125

Legacy properties - 115,389

Amina Court 3,430 -

Savannah Court 4,458 -

Victors Court 340 -

9, Mike Akhigbe Way, Abuja 8,785 8,785

Plot 3, Blokc A4, Olusegun Aina Street, Ikoyi 5,110 1,386

28A, Rumen Property 3,631 4,000

Locke apartments 4,273 1,364

58,152 159,049

======= ========

9.2 Interest receivable

Interest receivable are accrued interests on deposits with Sterling Bank, Coronation Bank Plc and Skye

Bank Plc. The deposits have maturity periods of between one day and twelve months.

9.3 Others - 243

====== ========

This balance represents amount receivable from Union Homes Plc in respect of expenses incurred on their

behalf as fund managers.

- Page 37 -


10. Property, plant and equipment

Plant and Household Total

Machinery equipment

N’000 N’000 N’000

Cost

As at 1/1/2018 53,704 2,624 56,328

Additions - 6,480 6,480

As at 31/12/2018 53,704 9,104 62,808

====== ====== =======

Depreciation

As at 1/1/2018 14,829 266 15,095

Charged for the year 13,426 1,114 14,540

As at 31/12/2018 28,255 1,380 29,635

====== ==== ======

Net book value

31 December, 2018 25,449 7,724 33,173

====== ===== ======

31 December, 2017 38,875 2,358 41,233

====== ====== ======

2018 2017

N’000 N’000

11. Investment properties

Completed investment property

At start of the period 11,608,813 11,157,027

Capital expenditure on property during the year 498,103 454,077

Disposal (2,469,000) (2,291)

At end of the period 9,637,916 11,608,813

========= ==========

This is detailed as follows:

- Page 38 -


Movement in the year ended 31 December, 2018

Net

Additional/ 1/1/2018 disposal 31/12/2018

N’000 N’000 N’000

Apartment at McDonald Court

Block 4-6 McDonald Rd, Ikoyi Lagos 1,139,143 4,000 1,143,143

11A Sapara Williams Str. V/I Lagos 1,715,714 18,161 1,733,875

Plot 3, Block A4, Olusegun Aina Str. Ikoyi 455,900 - 455,900

9, Mike Akhigbe Way, Abuja 330,000 3,186 333,186

1 Sinari Daranijo Street, V/I 2,214,301 269,247 2,483,548

Victors Courts, No. 2, Palace Rd, Parkview 308,202 - 308,202

28a, Rumens Street, Ikoyi 1,699,952 3,509 1,703,461

Amina Court 310,900 - 310,900

Locke apartments 665,701 - 665,701

Legacy Properties, Onipanu, Lagos

UHSL, 153, Ikororu Road 785,000 (785,000) -

UHSL 32, Awolowo Road, Ikoyi 508,000 (508,000)

UHSL 64, Opebi Road, Ikeja 356,000 (356,000) -

UHSL Plot 1479 Ogoaro crescent, Garki, Abuja 820,000 (820,000) -

FGN Sukuk 300,000 - 300,000

FGN Sukuk2 - 200,000 200,000

11,608,813 (1,970,897) 9,637,916

======== ======== ========

During the year, 61,892,715 units of shares of the fund were swapped for Legacy Properties owned by

Union Homes Savings and Loan Plc at N49.91 per share. The property was valued at N3,044,635,750

as at the time of the transaction.

Movement in the year ended 31 December, 2017

Net 1/1/2017 Additions/ 31/12/2017

disposals

N’000 N’000 N’000

Apartment at McDonald Court

Block 4-6 McDonald Road, Ikoyi Lagos 1,120,625 18,518 1,139,143

11A, Sapara Williams Street, V.I. 1,618,533 97,181 1,715,714

Plot 3, Block A4, Olusegun Aina Street, Ikoyi 452,625 3,274 455,899

9 Mike Akhigbe Way, Abuja 330,000 - 330,000

1 Sinari Daranijo Street, Victoria Island 2,200,000 14,302 2,214,302

Victors Courts 2, Palace Road, Parkview, Ikoyi 300,000 8,202 308,202

28a, Rumens Street, Ikoyi 1,702,243 (2,291) 1,699,952

Amina Court 310,900 - 310,900

Locke Apartments 653,101 12,600 665,701

Legacy Properties, Onipanu Lagos:

UHSL Plc, 153 Ikorodu Road 785,000 - 785,000

UHSL Plc, 32 Awolowo Road, Ikoyi 508,000 - 508,000

UHSL Plc, 64, Opebi Road Ikeja 356,000 - 356,000

UHSL Plot 1479 Ogaaro, Crescent, Garki Abuja 820,000 - 820,000

FGN Sukuk - 300,000 300,000

11,157,027 451,786 11,608,813

========= ====== =========

- Page 39 -


2018 2017 N’000 N’000

12. Rent received in advance

At 31 December 119,022 111,178

======== =======

Analysed into:

Current liability 112,522 90,678

Non-current liability 6,500 20,500

119,022 111,178

======= ========

Movement in rent received in advance

Balance at beginning 111,178 91,640

Recognised as income during the year (206,365) (200,064)

Rent received during year 214,209 219,602

Balance at end 119,022 111,178

======== ========

31 December, 2017

Property at Type Current Non-current Expiry

Portion portion date N’000 N’000 Locke Apartment at Lekki Residential 20,723 - 20/11/2018

Rumens Road Residential 22,299 10,000 31/3/2019

Victors Court Residential 7,088 - 6/11/2018

Amina Court at Abuja Residential 241 - 31/5/2018

Sapara Williams Residential 21,517 10,500 14/5/2019

Olusegun Aina Residential 3,620 - 31/7/2018

McDonald Court Residential 15,190 - 30/9/2018

90,678 20,500

====== =====

- Page 40 -


31 December, 2018

Property at Type Current Non-current Expiry

Portion portion date N’000 N’000 Locke Apartment at Lekki Residential 12,794 - 31/12/2019

Rumens Road Residential 27,992 - 30/11/2019

Victors Court Residential 14,655 - 06/11/2019

Olusegun Aina Residential 3,195 - 31/07/2019

McDonald Court Residential 17,990 - 30/09/2019

Savannah Court Residential 35,896 6,500 31/7/2020

112,522 6,500

====== =====

2018 2017 N’000 N’000

13. Accruals and other payables

Accruals (13.1) 850,209 272,559

Other payables (13.2.) 209,894 195,463

1,060,103 468,022

======= =======

2018 2017 N’000 N’000

13.1 Accruals

Unearned income from share swap (13.1.1) 625,391 -

Accrued income 58,152 159,049

Accrued AGM expenses 790 -

Interest received in advance 162,876 110,510

Audit and other professional fees 3,000 3,000

850,209 272,559

======= ======

13.1.1 This represent the excess of the amount earned on the swap transaction over the cost during the

year. As at the time of this report, the shares involved in the swap deal had not been re-purchased.

- Page 41 -


2018 2017 N’000 N’000

13.2 Other payables

Sundry customers 8,769 29,238

Management fees (note 13.3) 98,787 129,178

Trusteeship fee 2,500 2,500

Rating agency fee 2,500 -

Withholding tax 31,306 15,900

Caution deposit 5,489 4,050

Unclaimed dividend payable 50,584 -

Other payable 80 1,680

Custodian fees 9,879 12,917

209,894 195,463

======= ======

13.3 Management fees

Provision for the year 98,787 129,380

Reimbursable from fund manager - (202)

98,787 129,178

======= =======

Trusteeship and rating agency fees computed at rates specified in accordance with the Trust Deed

provisions were made in these financial statements as follows:

Management fee 1% of net assets

Trustee fee N2,500,000 minimum

Rating agency fee N2,500,0000

Registrars fee on transaction basis

Guarantors fee 0.5% of net assets

Custodian fees 0.10% of net assets

14. Property maintenance costs N’000 N’000

a) Expenses

At beginning 20,013 30,279

Incurred during the year/write back (20,013) (37,770)

Charge to income statement- Admin expenses - (7,491)

======= =======

b) Provision

Provision for the year (note 14.1) - 24,710

At the end - 24,710

======= ======

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14.1 Provision for the annual property maintenance fund is at 4% of the gross income earned in the year.

This amount is set aside to meet incidental maintenance costs of the Fund’s Property. At the end of

2018, this amount was longer set aside but would now be expended directly from the income as they

occur.

2018 2017

15. Unit holders equity N’000 N’000

Units offered for subscription:

970,873,787 units at N51.50 each 50,000,000 50,000,000

========= =========

Units issued and fully paid up

188,127,066 units at N50 each (nominal value) 9,406,353 12,500,989

======== =========

On 19 August, 2008, the Fund offered 970,873,787 units of N50.00 each for subscription. Out of this

offer, applications were received for 250,019,781 units. The Fund subsequently issued 250,019,781

units of N50 each at N51.50 each as these were fully subscribed for and paid for by their subscribers.

The share premium on the units sold were used to offset the initial public offer expenses.

During the year, 61,892,715 units of shares of the fund were swapped for Legacy Properties owned by

Union Homes Savings and Loan Plc at N49.91 per share. These properties are located at Ikorodu

Road, Awolowo Road Ikoyi, Opebi Road Ikeja and Ogaaro Crescent Garki, Abuja at a value of

N3,044,635,750 at the time of the transaction.

The properties were valued on 27/10/2016 at N1,312,500,000 by Ubosi Eleh & Co (Estate Surveyors

& Valuers) with FRC Reg. No. FRC/2015/NIESV/00000013406. Jide Taiwo & Co (Estate

Surveyors& Valuers) also valued the properties on 5 December, 2016 at N1,619,069,000. The Net

book value as at the time of sale was N2,469,000,000. As at the date of this report, the shares have not

been taken up.

12 Months 12 Months

Ended ended

31 Dec. 2018 31 Dec.2017

N N

16. Retained earnings

At the beginning 207,091 (87,615)

Dividend paid (187,515) -

Transfer from income statement 363,650 294,706

383,226 207,091

======= ========

17. Cashflow reconciliation

i) Operating profit before working capital changes

Net income before tax 384,160 324,998

Adjustments

Depreciation 14,540 11,945

Investment properties write off - 2,291

398,700 339,234

======= =======

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12 Months 12 Months

Ended ended

31 Dec. 2018 31 Dec.2017

N N

ii) Working capital changes

Net decrease/(increase) in receivables and other assets 77,951 27,492

Net (decrease)/increase in other liabilities and provisions (20,013) (4,271)

Net increase in accruals and other payables 614,939 8,665

Net (decrease)/increase in rent received

in advance (non-current) (14,000) 19,112

Net cash flow from operating activities 658,877 50,998

====== =========

18. Related party transactions

During 2018 financial year, there was no related party transaction recorded in the company.

ii) Management fee

Management fee payable for the year ended 31 December, 2018 in respect of this service is

calculated at 1% of the net asset value of the Fund. This has been calculated to be N98,787,000

which represents 18.26% per annum of the gross income for the year.

19. Comparative figure

Certain prior year balances have been reclassified to conform with current year presentation.

20. Going concern

The financial statements are prepared on the basis of accounting policies applicable to going

concern.

21. Contingent Liabilities

The fund manager is of the opinion that there are no known contingent liabilities as at the end

of the period.

22. Approval of Financial Statements

These financial statements were approved by the Investment Committee of the company on 22

March, 2019.

- Page 44 -


STATEMENT OF VALUE ADDED


2018 2017

N’000 % N’000 %

Gross earnings 541,096 530,622

Deduct:

Administrative overheads and

payments for other services in Nigeria (43,609) (64,299)

Value added 497,487 100 466,323 100

======== ===== ======== ====

Applied as follows:

Fund manager’s remuneration 98,787 20 129,380 28

Government as taxes 20,510 4 30,292 6

Retained earnings for future

Expansion, distribution and maintenance of assets

Depreciation 14,540 3 11,945 3

Net income after taxation 363,650 73 294,706 63

Value added 497,487 100 466,323 100

======== ===== ======== =====

- Page 45 -


FINANCIAL SUMMARY

31/12/2018 31/12/2017 31/12/2016 31/12/2015 31/12/2014

N’000 N’000 N’000 N’000 N’000

Cash and cash equivalents 80,446 417,392 269,809 1,715,476 2,694,705

Other assets 6,721 6,893 8,103 4,907 6,244

Trade and other receivables 239,494 318,286 344,568 159,031 225,409

Investment properties 9,637,916 11,608,813 11,157,027 10,677,873 9,719,625

Property, plant & equipment 33,173 41,233 50,554 - -

Financial assets held to maturity 970,954 914,676 1,159,020 - -

10,968,704 13,307,293 12,989,081 12,557,287 12,645,983

======== ======== ======== ======== ========

Liabilities

Rent received in advance 119,022 111,178 91,640 169,614 216,815

Payables to related parties - - - 131,695 118,763

Accruals and other payables 1,060,103 468,022 459,357 183,383 770,140

Provisions - 20,013 24,710 30,279 21,631

1,179,125 599,213 575,707 514,971 1,127,349

------------- ------------ ------------- ------------- -------------

Equity

Unit holders equity 9,406,353 12,500,989 12,500,989 12,500,989 12,500,989

Retained earnings 383,226 207,091 (87,615) (458,673) (982,355)

9,789,579 12,708,080 12,413,374 12,042,316 11,518,634

-------------- ------------- ------------- ------------- --------------

10,968,704 13,307,293 12,989,081 12,557,287 12,645,983

======== ======== ======== ======== ========

Profit and loss

Investment income 541,096 530,622 617,752 756,978 880,297

======= ======== ======= ======= ========

Profit/loss before taxation 363,650 324,998 394,998 526,798 (1,256,583)

Taxation - (30,292) (23,940) (3,115) (33,589)

Profit after taxation 363,650 294,706 371,058 523,683 (1,290,172)

======= ======= ======== ======== ========

Per share information

Basic earnings per share (N) 1.93 1.18 1.48 2.09 (5.16)

Net assets per share (N) 52.03 50.83 49.65 48.17 46.07

Dividend paid (N) - - - - 2.13

===== ===== ===== ===== =====

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